In the context of the CO2 challenge, oxy-fuel combustion in internal combustion engines (OFC-ICE) arises as a promising technology for carbon capture and almost zero-NOx solutions. Although the literature shows some experimental and theoretical works on OFC-ICE, there is a lack of systematic studies dealing with dilution strategies or where non-synthetic EGR is used. Using a combination of 0D-1D and CFD modeling and experimental measurements, dilution with oxygen (λ > 1) and real EGR in a single-cylinder spark-ignition OFC-ICE is here assessed, considering thermo-mechanical limitations and knocking. Results show that an EGR strategy is more appropriate than O2 dilution. A slightly poor mixture near stoichiometric conditions, with EGR rates around 70%, reduces NOx more than 99%, and CO and uHC up to 90% with respect to the conventional ICE. It is concluded that OFC-ICE has a lower knocking propensity, thus allowing to increase the compression ratio to partially compensate for the expected efficiency diminution to about 4 percentage points.